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Approval to Pre-Pay the City’s Safety & Miscellaneous Unfunded Actuarial Obligations <br />FY 2023-24 <br />June 6, 2023 <br />Page 2 <br />3 <br />5 <br />0 <br />0 <br />pension liability. This happens when actual plan performance does not meet CalPERS <br />assumptions, such as the investment earnings rate and retiree mortality. The unfunded <br />liability is a debt of the City, as the defined benefit plan is a promise of future pension <br />payments to employees. <br />The unfunded liability for both plans are as follows: <br />Plan Type Unfunded Liability Amount at 6/30/21 <br />Safety (Police and former Fire) $339.4 million <br />Miscellaneous (all other employees) $234.8 million <br />In August 2023, the City will receive the updated CalPERS net liability at June 30, 2022, <br />reflecting receipt of pension obligation bond proceeds in September 2021. Each year, <br />CalPERS requires the City to make a payment on the unfunded liability (UL). One way <br />to reduce the City’s cost is to pay the entire annual contribution in July, rather than <br />spreading the contribution equally over 12 months. If the City chooses to pay the entire <br />contribution by July 31st, the contribution is reduced as follows: <br />Plan Type UL (Pay over 12 months) UL Pre-Pay Amount Savings <br />Miscellaneous $9,888,635 $9,568,651 $319,984 <br />Safety $13,207,651 $12,780,268 $427,383 <br />Projected Savings $747,367 <br />The FY 2023-24 budget has incorporated the assumption that the City will pre-pay its <br />UL for the upcoming fiscal year and realize the above-referenced projected savings. <br />FISCAL IMPACT <br />The General Fund is the primary source for unfunded liability payments. Restricted <br />funds pay for less than one-third of the contributions for miscellaneous employees. <br />The proposed FY 2023-24 pre-payment will result in an estimated net savings of <br />$747,367, which has been included in the proposed FY 2023-24 budget. <br />After the City Council adopts the FY 2023-24 Budget, funds will be budgeted and made <br />available in the following accounts for the specified year: